Final Results

20th May 2008 07:00



Preliminary statement for the year ended 31 March 2008

London - 20 May 2008

ICAP plc (IAP.L), the world's premier interdealer broker, today announced its audited results for the year ended 31 March 2008. 

Highlights:

	Year ended 31 March 2008	Year ended 31 March 2007	Increase
	£m	£m	%
Revenue	1,304.4	1,106.3	18
Net operating expenses1,3	972.7	858.6	13
Profit2	330.2	251.6	31
Profit before tax - statutory	275.1	213.8	29

EPS (basic)	24.5p	19.3p	27
EPS (adjusted basic)	31.3p	24.6p	27
Dividends per share	15.65p	12.3p	27

 

Record Group revenue, profit and adjusted basic EPS following strong growth across the Group

Group revenue rose by 18% to £1,304.4m

Electronic revenue increased by 38% to £273.9m and operating profit3 by 93% to £106.9m

On an underlying basis4 revenue grew by 19% and operating profit by 36%

The Group's operating profit3 margin rose to a record 25% (2007 : 22%)

The Group continues to invest in people and technology, particularly further upgrades to the Group's electronic broking platforms

Strong free cash flow of £231.7m. Net debt of £58.8m (2007 : net cash £19.5m) after investing £203.3m on acquisitions 

The directors recommend a final dividend per ICAP share of 11.95p, which will be paid on 22 August 2008. The full year dividend will be 15.65p, an increase of 27%. 

Michael Spencer, Group Chief Executive Officer, said "These record results demonstrate a strong performance from ICAP. We have benefited from higher volatility in the interest rate, FX, equity, commodities and in parts of the credit and emerging markets that began in June 2007. Both our electronic and voice broking businesses felt the positive impact of these higher levels of activity and we benefited from substantial operating leverage, particularly in the electronic business. 

The outlook for the business is positive, our strategy remains unchanged and our priorities are clear. We will continue to expand our business in the key "focus" areas, complete the integration and expand Capital Shipbrokers and the Link equity derivatives business, build our global cash equities business, expand in post-trade services and extend the product coverage on our electronic broking platforms.

There is an increasing number of expansion opportunities for the Group, both large and small, as the world's financial markets grow and innovation continues. Industry consolidation is also likely to continue and the current environment offers many attractive opportunities to acquire businesses. ICAP is well placed to make further acquisitions and fund the development of the Group using its existing financial capacity.

There are many powerful, structural reasons to be positive about the future of ICAP's business and of the markets in which we operate. We estimate that the underlying annual growth rate of industry revenues, in the medium term, will be more than 10%, although there are periods when volatility and volumes in our markets can be very high. The active markets we have enjoyed since June 2007 have continued into the new financial year and we believe that higher volatility will continue to drive volume growth."

Notes

1 Includes operating expenses net of other income.2 Profit is defined as pre-tax profit before amortisation and impairment of intangibles arising on consolidation and exceptional items.

3 Excludes amortisation and impairment of intangibles arising on consolidation and exceptional items.

4 As per note 3 and adjusted to exclude the impact of foreign exchange and acquisitions.

There will be a briefing for analysts and shareholders at 09:30 BST on Tuesday 20 May 2008 at 2 Broadgate, London EC2M 7UR. An audiocast of the presentation made to analysts at 09:30 BST on Tuesday 20 May 2008 will be available on the web site, www.icap.com, at 17:00 BST on Tuesday 20 May 2008. It will remain on the web site for six months. A further conference call will be held at 14:30 BST/09:30 EST for investors and analysts based in North America. For dial in details and a copy of the presentation please contact Maitland on +44 (0) 20 7379 5151.

Contacts: Michael Spencer Group Chief Executive Officer +44 (0) 20 7050 7400

Mike Sheard Director of Corporate Affairs  +44 (0) 20 7050 7103

Neil Bennett Maitland  +44 (0) 20 7379 5151

 

  ICAP plc 

Preliminary statement for the year ended 31 March 2008

Review of operations

After another very successful year, the Group reports a record profit of £330.2 million before tax, amortisation and impairment of intangibles arising on consolidation and exceptional items; this represents a 31% increase over the prior year. On a statutory basis, profit before tax was £275.1 million for the year ended 31 March 2008 (2007 - £213.8 million). We continue to believe that profit before tax, amortisation and impairment of intangibles arising on consolidation and exceptional items better reflects the Group's underlying year-on-year performance. This measure is reconciled to profit before tax on the face of the consolidated income statement.

The majority of ICAP's revenue is US dollar denominated and therefore the weakening of the dollar against sterling had a significant impact on ICAP's reported results. Year-on-year profit before tax would have been approximately £14.0 million higher without the dollar depreciation.

Delivering on our strategy

We have made further significant progress towards our strategic goal, which has been clear and consistent for several years; to be the leading global intermediary in the wholesale OTC markets by a clear margin. Our aim is to have at least a 35% share of overall interdealer market revenue and generate 50% of our operating profit* from electronic broking. We are on our way to achieving our vision: to create the global exchange for OTC financial products and to build a global brand in wholesale financial services. 

These record results demonstrate a very strong performance from ICAP. We have benefited from higher volatility in the interest rate, FX, equity, commodities and in parts of the credit and emerging markets that began in June 2007. Both our electronic and voice broking businesses felt the positive impact of these higher levels of activity and we benefited from the substantial operating leverage, particularly in the electronic business. 

A year ago we said that to deliver on our strategy we needed to accelerate the growth of electronic broking revenue and expand into new markets and geographic areas to continue the growth of the voice broking business. We have achieved all of that, while improving margins and making some important acquisitions. 

We rely heavily on the quality of our management team to drive up our operating profit margins through market share growth and tight cost control and to extract the scale economies that make these businesses so sustainable. As a people business, a key attribute of our management team is our ability to recruit and retain the highest quality staff; brokers, marketing and sales staff, support departments, technology professionals and many others. 

Competitive environment

The major interdealer broker firms continue to consolidate market share as banks seek to rationalise their broking relationships and achieve economies of scale. While this process of consolidation has already run a long way in certain products, it is still in the early stages in others such as equity derivatives and commodities. 

In the past we have defined our market rather narrowly but, as we expand and further diversify the business, a broader definition is necessary. On the original definition of our market ICAP has maintained its share. In addition to the interdealer broking markets for FX, interest rates, credit, emerging markets and commodities we need to consider the scale of markets such as shipping, post trade services and equity derivatives. ICAP is working with an external consultant to estimate the size of ICAP's available market using this broader definition. Markets like global cash equities and the financial futures markets remain separate from this broader definition. On this basis ICAP currently estimates its share (including Link) of this market to be 20-22%. Our new target is to have 35% of this larger market. 

 

The financial and commodity derivatives exchanges have continued to expand the volume of their business, more or less in line with the electronic OTC markets, demonstrating the often symbiotic relationship between these markets. The launch of new futures or options contracts is a risky and often disappointing business. Given the lack of liquidity, quite frequently deals are completed in the OTC markets and then novated into an exchange to take advantage of the clearing facilities. We have found that innovation in the OTC markets is much more frequent and has a much greater chance of success. Recent examples include freight derivatives and carbon emissions. 

We believe that there will be opportunities to launch new exchange-traded products and are continuing with the lengthy application process with the Financial Services Authority to establish a regulated market. Our combination of voice brokers and our electronic network, together with exchange trading technology, places us in a strong position to launch new regulated markets in areas where there is considerable client demand.

Using technology - the need for speed

ICAP's electronic broking competitiveness relies on our ability to continuously improve the speed of price and liquidity discovery and to transact at ever faster deal speeds, with almost instantaneous response times. The requirements of algorithmic trading have created new demands on our networks and systems. Of course all of this is delivered over one of very few truly global electronic transaction networks. 

The greatest technical challenge faced by the operators of all electronic trading platforms is ensuring that the technology is ahead of demands of the customers. During this year we spent 12% of our revenue on technology. This is a significant investment but it is essential to keep both the electronic and voice broking businesses competitive by meeting our customers' diverse expectations. 

Significant economies of scale have been realised by leveraging internally developed and externally acquired trading platforms. ICAP now has a global IT organisation of 650 professionals based in the Americas, Europe, the Middle East and Asia. They are committed to the development and support of these systems. 

Geographic performance

Europe Middle East & Africa (EMEA) 

	£m	Headline Growth	Underlying Growth*
Revenue	610.0	21%	20%
Operating profit*	166.3	34%	32%

Once again EMEA was the most profitable region with the highest operating profit* margin. The region delivered a very good performance during the period with both voice and electronic revenue growing rapidly. Electronic broking of spot FX was a highlight. There has been very strong revenue growth in the interest rate derivatives business, in part a result of steeper yield curves. Credit derivatives also grew significantly with an expanding portion traded electronically. Demand for corporate bonds remained subdued. The commodities business has produced another very strong performance helped by the acquisition of the shipping businesses. 

The Americas 

	£m	Headline Growth	Underlying Growth*
Revenue	527.8	15%	20%
Operating profit*	129.3	24%	34%

While revenue and profit increased substantially on an underlying basis, dollar weakness reduced this on a headline basis: the profitability of the region improved during the year. Credit derivatives grew very strongly, benefiting from active markets. Overall corporate bond markets were slow. In the emerging markets business, mainly driven by Latin American products, growth slowed in the second half after a very active period. The commodities business performed well, as did equity derivatives. The flight to quality and steeper yield curves contributed to growth in the interest rate markets, particularly from the electronic business.

Asia Pacific 

	£m	Headline Growth	Underlying Growth*
Revenue	166.6	14%	14%
Operating profit*	36.1	89%	66%

This was a more stable year but the voice broking market has continued to be highly competitive in the region with several smaller competitors still trying to build their presence. The strongest growth came from the emerging markets and interest rates business, the latter boosted by a very significant input from electronic broking. We are investing to build businesses in the emerging markets, which at this stage implies lower margins. Our joint venture with CFETS in Shanghai began operations in September 2007. The recent acquisition of Link will further boost our performance in equity derivatives in Asia Pacific.

Divisional performance

Electronic broking 

	£m	Headline Growth	Underlying Growth*
Revenue	273.9	38%	30%
Operating profit*	106.9	93%	83%

Electronic broking has had an outstanding year with record volumes, revenue and profit. Average daily electronic broking volumes in March 2008 reached the highest level ever as volatility continued in the global financial markets. Overall, average daily volume in March was $966.1 billion, breaking the record of $933.9 billion set in August 2007. New records were also set in both fixed-income products on the BrokerTec platform - including US Treasury products, EU repo and US repo - which increased 12% year-on-year to $713.0 billion (March 2007: $639.4 billion). Spot FX traded on ICAP's electronic platform, EBS, also increased 34% year-on-year in March to an average daily volume of $253.1 billion (March 2007: $189.1 billion). Three of the top ten trading days on EBS were in March 2008.

The combination of the electronic spot FX and our fixed income electronic broking businesses has created a global multi-product network platform that we believe has further major growth potential. Electronic broking revenue increased significantly, by 38% to £273.9 million, primarily in existing markets. The operating profit* margin improved from 28% to 39%; driving the share of our operating profit* from electronic broking to 32% compared with 22% in 2007. The current product portfolio encompasses over 30 products, up from 20 products a year ago. This is the largest electronic broking business in our industry with an estimated 46% market share and has significant economies of scale through combining and leveraging technology, networks and platforms. The combined global network covers more than 6,000 workstations on 2,000 dealing floors spread across 50 countries. 

Algorithmic trading in both the fixed income and FX markets has continued to grow quickly and now makes a significant contribution to liquidity on the two trading platforms.

The majority of the costs and inefficiencies in the OTC market usually occur post trade, where transactions need to be manually confirmed and entered into the banks' systems for both settlement of the trade and position management. For ICAP a fundamental business objective is the integration of our networks and systems with those of our customers' post-trade systems. Establishing these links can be difficult and slow, involving the banks in investing time and money to complete this integration, but once established they provide a significant advantage. 

As a part of this partnership we believe that there are many business opportunities in streamlining post-trade services for our customers as they struggle to handle the enormous increase in trading volumes in many asset classes in recent years. It is estimated that there are 500 million transactions annually in the wholesale OTC markets (excluding futures and the retail markets), which cost $5 billion to process. Improving the efficiency of the whole process allows volumes to increase while minimising risk and reducing costs to all market participants.

This year we have added Traiana to our existing portfolio of post-trade services. This portfolio includes Reset, a matching service which reduces outstanding fixing risk in the interest rate market and through our associate, TriOptima, the web-based early termination and portfolio reconciliation service. 

Traiana is independently managed within ICAP. It provides a post-trade, pre-booking service to the FX industry with existing connectivity to most trading platforms and major banks front and back office systems via its Harmony network. This network is used by over 50 of the world's leading banks and has grown to process approaching 100,000 deal tickets a day. It has a very strong position in FX prime broking products as well as developing services in metals, interest rate derivatives and credit derivatives. 

A significant portion of ICAP's trading volumes in the OTC markets, particularly cash products, is cleared through a variety of clearing venues. We believe that the wider use of fungible clearing for OTC derivative instruments will increase the efficiency of these markets, making them more attractive and expanding the use of electronic broking. We are supporting plans by the banks together with The Clearing Corporation to introduce OTC derivative clearing, initially in the credit derivatives market.

Voice broking

	£m	Headline Growth	Underlying Growth
Revenue	990.8	14%	17%
Operating profit*	202.9	19%	24%

The commitment of both financial and intellectual capital to the OTC markets continues to provide a stimulating environment for financial products innovation. As new products emerge, voice brokers help to develop these nascent, illiquid markets, drawing together counterparties and developing new businesses. We have identified several key markets that we believe have greater structural growth potential for the next three to five years. It is on these "focus" areas that we are concentrating for the expansion of our voice broking business - emerging markets, credit, cash equities and equity derivatives, and commodities including shipping - increasingly diversifying our revenue base. This year ICAP's revenue derived from businesses acquired or started in the previous three years increased again to a very healthy 20%, up from 16% in the previous financial year. We will continue to reallocate resources into these high growth areas, including the recently acquired equity derivatives business Link, where headcount has risen by 59% in the year while the headcount in the more commoditised areas has fallen by 3%. 

Voice broking volumes have continued to benefit from the higher activity level created by increased volatility and continuing disruption in the money markets. Steeper yield curves have provided a significant boost to interest rate derivatives activity in many markets. The higher price of credit risk has kept the credit derivatives market very active, notably in single name credit default swap and index products. ICAP benefits from having its activities spread over a wide range of markets and geographies with a variety of drivers of growth in those markets.

Emerging market products have grown in all centres as these markets develop and derivatives in both interest rate and currency markets evolve. For much of the year the commodity markets have been very active, with volatility in the oil markets continuing. In addition, other products such as freight derivatives have been an important contributor to growth. 

Information division

	£m	Headline Growth	Underlying Growth
Revenue	39.7	-	(2%)
Operating profit*	21.9	(2%)	(1%)

ICAP is also the source of global market information and commentary for professionals in the international financial markets. Our market data offers real-time, end-of-day and historical market data sourced from our global interdealer trading platforms, providing authoritative and comprehensive information on global markets across a broad range of asset classes. A significant part of the revenue of ICAP's information division is drawn from the electronic broking businesses.

Markets

To provide investors with a broader understanding of the growth drivers to the Group's business, ICAP provides an analysis of its business by market. These are interest rates, credit, commodities, FX, equities, emerging markets and information. These groups are aligned with the way our customers manage their businesses and as a result ICAP is able to explain the drivers of performance more clearly. The revenue and growth rates of ICAP's revenue for these product groups are set out below:

Revenue £m	2007/08	2006/07	Growth
Interest rates	546.6	468.4	17%
Credit	158.5	124.9	27%
Commodities	131.3	101.1	30%
FX	196.6	159.2	23%
Equities	108.6	98.3	10%
Emerging markets	123.1	114.6	7%
Information	39.7	39.8	-
Total	1,304.4	1,106.3	18%

Interest rates

There was a sharp steepening of yield curves following the start of the credit crisis in June 2007, particularly in the dollar, with a flight to quality by investors. These represent attractive markets for trading and we have seen very busy interest rate derivatives markets. According to International Swaps and Derivatives Association (ISDA), notional amounts of interest rate derivatives outstanding, which include interest rate swaps and options and cross-currency interest rate swaps, grew almost 34% to $382.3 trillion in 2007, the same rate of growth as the previous year. The liquidity problems in the short dated interest rate markets have attracted a great deal of attention from the central banks but secured lending through the repo markets has been very active and ICAP's electronic volumes in the US and EU repo increased by 25% during the year. In the US Treasury market, volumes increased by 13%, ICAP's electronic volume in US Treasury products increased by 27% during the year.

Credit

The re-pricing of risk in the credit markets since June 2007 led to very active markets in both credit default indices and single name credit default swaps and volumes in the credit derivatives markets continued to grow very rapidly. However, many of the more complex, structured products, where ICAP did not have a large share of the market, experienced a dramatic fall off in activity. ISDA's survey, which focuses on credit default swaps, indicates that the notional principal outstanding volume grew 81% to $62.2 trillion in 2007; the previous year the growth rate was 102%. Growth in secondary market trading in the corporate bond markets remained subdued. In EMEA, ICAP's electronic broking platform covering both credit default indices and single name credit default swaps has expanded very successfully. Significantly more than half of the volume traded is completed electronically. In addition to ICAP's successful voice broking business in North America we are working hard to expand the use of electronic broking there too.

Commodities

The markets in both EMEA and America have been very active, with the oil markets particularly volatile, and we benefited from these market conditions. Coal, gas and electricity were also busy. There was very strong growth in two of the newer markets: carbon emissions and freight derivatives. ICAP launched a new electronic tanker freight derivatives broking service in April 2008. 

The growth of China and India has combined with other structural factors to produce convergence within the commodities markets, and shipping is increasingly important in this process. J.E.Hyde, the global shipping business acquired by ICAP in May 2007, covers a broad range of ship broking and related services to the shipping industry. Its core business of dry cargo ship broking and the sale and purchase of ships is complemented by shipping market research, yacht broking and shipping website design. Capital Shipbrokers was acquired in January 2008 to expand further ICAP's ship broking coverage to a full service spanning chartering, sale and purchase, freight derivatives and research in the tanker sector as well as in dry cargo. 

Foreign exchange

As an asset class FX has experienced a resurgence in recent years. There has been significant volume growth and, this year, several periods of high volatility. On ICAP's spot FX electronic broking platform, EBS, we have seen increasing business completed through the prime broking arms of our customers, including algorithmic trading. In March 2008 Spot FX traded on the EBS platform increased 34% year-on-year to an average daily volume of $253.1 billion (March 2007: $189.1 billion). Three of the top ten trading days on EBS were in March 2008. 

 

In Forward FX, ICAP's success in European countries with its i-Forwards project is being extended to incorporate liquidity from our Asian and North American customers. In addition to voice broking in non-deliverable forward FX, ICAP launched non-deliverable forward FX trading on the EBS platform in seven Asian currencies and the Russian rouble this year.

Equities

There has been significant growth in the use of equity derivatives during the past five to seven years as a result of the search for yield, the demand for absolute returns and the emergence of volatility as a traded asset class in its own right. In 2007, according to ISDA, the notional amounts of equity derivatives outstanding, consisting of equity swaps, options and forwards, grew from $7.2 trillion to $10.0 trillion. 

The vast majority of ICAP's business in the equity markets has been in derivatives and more complex structures in the UK, US and Japan. As one of the "focus" areas that we have identified as having faster structural growth opportunities, we have been expanding our activities in these markets, both organically and by acquisition. During the past year ICAP increased its staff in this area by 54%. 

However, the brokered market is large, fragmented and we believe will consolidate. At the beginning of April 2008, we acquired Link, the leading specialist global equity derivatives broker, for an initial consideration of £135 million. This acquisition doubles ICAP's overall global market share in equity derivatives (taking it to roughly 18%) and makes it the market leader by a substantial margin. 

Link enjoys a very strong market position with offices in London, New York and Hong Kong servicing over 500 customers. The combination of Link's strengths in index and single stock derivatives with the majority of ICAP's existing equity derivatives business outside the Americas creates no significant overlaps and has a staff of 210 brokers. 

The acquisition of Link is an important further step in building ICAP's overall capability in the equity markets and good synergies exist between cash equities execution and a well integrated equity derivatives business. In cash equities the Group has started building a global, non-conflicted, agency only, cash equity broker. Over the next few years this is expected to leverage both brokers and technology to build a substantial global business. 

Emerging markets

ICAP's emerging market teams in EMEA, the Americas and Asia-Pacific cover a very broad range of products; including FX, interest rate products, government and corporate bonds. During the past year activity levels have been mixed, with some products growing very strongly and others less so; however given their diversity this is to be expected. After the boom and bust cycle over many years, we believe that the emerging markets now represent real opportunities as they demonstrate fiscal responsibility and sound financial management of their exciting economies.

Often our initial role in these markets is to link the interest from our larger customers in the main financial centres with the local banks in the emerging markets. In some markets, activity then expands more quickly in the emerging market and more deals are done between customers in that market; in others trading is predominantly in the offshore market.

We have found and expect to find many more opportunities in Eastern Europe, Russia, Turkey and Africa. In Asia Pacific we have a well-developed network of 12 offices with more than 700 staff covering the markets. In many parts of Central and Latin America the Group has developed a network by working together with the local exchanges. Recently ICAP acquired a 15 percent stake in the Bolsa de Productos de Chile, a commodity exchange in Chile, to help us to build on our already strong market position in the commodity markets.

Balance sheet and cash flow

The Group converted all of its operating profit to cash despite the impact of exceptionally high trading volumes on customers' back offices. ICAP's free cash flow grew to £231.7m (2007 - £190.1m). Operating cash grew by £112.0m. This growth was offset by the year on year impact of initially unsettled trades and exceptional items so that cash from operations grew by £58.4m to £361.9m. Additionally, cash tax and net interest payments increased by £8.0m to £94.2m and capital expenditure rose by £11.6m to £42.7m.

 

The very strong cash flow has meant that despite dividends paid in the year increasing by £26.4m and the investment of £203.3m in acquisitions in year, as at 31 March 2008 ICAP had net debt of only £58.8m (March 2007 - net cash £19.5m).

During the year ICAP successfully refinanced and increased its bank facilities into a new three year £520m revolving facility on attractive terms, of which £328m was drawn at 31 March 2008. In addition, post-year end, ICAP financed the initial consideration for Link with a two year £150m term loan. This demonstrates the attractiveness of ICAP's business model to potential lenders.

Dividend

Subject to shareholder approval, a final dividend of 11.95p is proposed. This compares to 9.3p in the prior year and would result in a full-year dividend of 15.65p up 27% on the financial year 2006/07 broadly in line with growth in profit before tax. The dividend will be paid on 22 August 2008 to shareholders on the register on 25 July 2008, ex-dividend date being 23 July 2008.

Dividend cover has remained at the same level as the prior year and is covered two times by adjusted basic EPS.

Interim dividends are calculated as 30% of the previous year's full-year dividend. This approach will continue for the 2008/09 financial year.

  Exceptional items

Exceptional items in the year include final costs from the integration of EBS of £13.5m. The total exceptional integration costs are in line with the anticipated $48m while the total annual benefit for the year ended 31 March 2009 onwards will be at least $58m as previously estimated.

As disclosed in the half year report, a sub-custodian made a post-settlement adjustment debiting ICAP's account for a total of £22.5m without notice or our consent. ICAP continues to believe that this adjustment is erroneous and ICAP is taking legal proceedings to recover this money. ICAP has fully provided against this debt (£12.7m after offsetting cost recoveries).

A total of £14.9m has been recognised as exceptional income, mainly in respect of the disposal of exchange shares and seats together with litigation settlements in Australia and Hong Kong. 

A total tax credit of £4.4m has been recognised in respect of these items.

Outlook

The outlook for the business is positive, our strategy remains unchanged and our priorities are clear. We will continue to expand our business in the key "focus" areas, complete the integration and expand Capital Shipbrokers and the Link equity derivatives business, build our global cash equities business, expand in post-trade services and extend the product coverage on our electronic broking platforms.

There is an increasing number of expansion opportunities for the Group, both large and small, as the world's financial markets grow and innovation continues. Industry consolidation is also likely to continue and the current environment offers many attractive opportunities to acquire businesses. ICAP is well placed to make further acquisitions and fund the development of the Group using its existing financial capacity.

There are many powerful, structural reasons to be positive about the future of ICAP's business and of the markets in which we operate. We estimate that the underlying annual growth rate of industry revenues, in the medium term, will be more than 10%, although there are periods when volatility and volumes in our markets can be very high. The active markets we have enjoyed since June 2007 have continued into the new financial year and we believe that higher volatility will continue to drive volume growth.

*Operating profit excludes amortisation and impairment of intangibles arising on consolidation and exceptional items. Underlying additionally excludes the impact of foreign exchange and acquisitions.

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Notes to editors:

About ICAP

ICAP is the world's premier voice and electronic interdealer broker and the source of global market information and commentary for professionals in the international financial markets. The Group is active in the wholesale markets in interest rates, credit, commodities, foreign exchange and equity derivatives. ICAP has an average daily transaction volume in excess of US$1.5 trillion, more than 60% of which is electronic. ICAP plc was added to the FTSE 100 Index on 30 June 2006. For more information go to www.icap.com.

  

Audited consolidated income statement
Year ended 31 March 2008
				Before
				amortisation
				and impairment		Amortisation
				of intangibles		and impairment
				arising on		of intangibles		Exceptional
				consolidation and		arising on		items
				exceptional items		consolidation		(note 3)		Total
		Note	£m			£m		£m		£m
	Revenue	2		1,304.4		-		-		1,304.4
	Operating expenses			(988.4)		(42.1)		(26.2)		(1,056.7)
	Other income			15.7		-		14.9		30.6
	Operating profit	2		331.7		(42.1)		(11.3)		278.3
	Finance income			23.4		-		-		23.4
	Finance costs			(29.8)		-		-		(29.8)
	Share of profit/(loss) of associates after tax	2		4.9		(1.7)		-		3.2
	Profit before tax			330.2		(43.8)		(11.3)		275.1
	Tax	4		(116.7)		3.4		4.4		(108.9)
	Profit for the year			213.5		(40.4)		(6.9)		166.2
	Attributable to:
	Equity holders of the parent			198.6		(36.0)		(6.9)		155.7
	Minority interests			14.9		(4.4)		-		10.5
				213.5		(40.4)		(6.9)		166.2
	Earnings per ordinary share
	- basic	6								24.5p
	- diluted	6								23.9p
	Dividend per ordinary share
	(including proposed dividend)	5								15.65p

Year ended 31 March 2007
			Before
			amortisation
			and impairment		Amortisation
			of intangibles		and impairment
			arising on		of intangibles		Exceptional
			consolidation and		arising on		items*
			exceptional items		consolidation		(note 3)		Total
		£m			£m		£m		£m
	Revenue	2	1,106.3		-		-		1,106.3
	Operating expenses		(874.5)		(40.9)		(11.3)		(926.7)
	Other income		15.9		-		16.1		32.0
	Operating profit	2	247.7		(40.9)		4.8		211.6
	Finance income		23.0		-		-		23.0
	Finance costs		(25.1)		-		-		(25.1)
	Share of profit/(loss) of associates after tax	2	6.0		(1.7)		-		4.3
	Profit before tax		251.6		(42.6)		4.8		213.8
	Tax	4	(92.1)		3.3		0.7		(88.1)
	Profit for the year		159.5		(39.3)		5.5		125.7
	Attributable to:
	Equity holders of the parent		155.1		(39.3)		5.5		121.3
	Minority interests		4.4		-		-		4.4
			159.5		(39.3)		5.5		125.7
	Earnings per ordinary share
	- basic	6							19.3p
	- diluted	6							18.8p
	Dividend per ordinary share
	(including proposed dividend)	5							12.3p
			*Exceptional items for the prior year have been reanalysed to show income and expense items separately where the items are unrelated.

Audited consolidated statement of recognised income and expense
										Year ended		Year ended
										31 March		31 March
										2008		2007
										£m		£m
	Revaluation of available-for-sale investments									0.9		3.5
	Net movement on cash flow hedges									(22.9)		1.8
	Actuarial losses on retirement benefit obligations									(0.2)		(0.2)
	Exchange adjustments on net investments in overseas subsidiaries									2.0		(52.7)
	Revaluation gains realised in the year									(11.2)		(5.9)
	Net current tax on items recognised in equity									3.7		(0.1)
	Net deferred tax on items recognised in equity									0.8		4.3
	Income and expense recognised directly in equity									(26.9)		(49.3)
	Profit for the year									166.2		125.7
	Total recognised income and expense for the year									139.3		76.4
	Total recognised income and expense for the year attributable to:
	Equity holders of the parent									128.8		72.0
	Minority interests									10.5		4.4
										139.3		76.4
Audited Consolidated balance sheet
										As at		As at
										31 March		31 March
										2008		2007
								Note		£m		£m
	Assets
	Non-current assets
	Intangible assets arising on consolidation									842.5		681.8
	Intangible assets arising from development expenditure									36.0		21.5
	Property, plant and equipment									54.5		55.9
	Investment in associates									31.8		29.8
	Deferred tax assets									47.5		33.3
	Trade and other receivables									10.4		7.9
	Available-for-sale investments									22.0		26.6
										1,044.7		856.8
	Current assets
	Trade and other receivables									38,035.7		83,804.3
	Available-for-sale investments									11.8		20.0
	Cash and cash equivalents									384.4		323.3
										38,431.9		84,147.6
	Total assets									39,476.6		85,004.4
	Liabilities
	Current liabilities
	Trade and other payables									(38,077.9)		(83,794.9)
	Short-term borrowings and overdrafts									(346.1)		(22.9)
	Tax payable									(83.5)		(71.1)
	Short-term provisions									(15.3)		(10.0)
	Obligations under finance leases									-		(0.1)
										(38,522.8)		(83,899.0)
	Non-current liabilities
	Trade and other payables									(18.0)		(27.8)
	Long-term borrowings									(97.1)		(280.9)
	Tax payable									(3.7)		-
	Retirement benefit obligations									(1.0)		(1.4)
	Deferred tax liabilities									-		(0.2)
	Long-term provisions									(0.6)		(1.4)
										(120.4)		(311.7)
	Total liabilities									(38,643.2)		(84,210.7)
	Net assets									833.4		793.7
	Equity
	Capital and reserves
	Called up share capital									64.9		64.9
	Share premium account									397.8		397.2
	Other reserves									12.2		43.7
	Retained earnings									344.9		275.4
	Equity attributable to equity holders of the parent									819.8		781.2
	Minority interests									13.6		12.5
	Total equity							8		833.4		793.7
Audited consolidated cash flow statement
										Year ended		Year ended
										31 March		31 March
										2008		2007
								Note		£m		£m
	Cash flows from operating activities							11		267.7		217.3
	Cash flows from investing activities
	Dividends received from associates									4.0		3.9
	Other equity dividends received									2.7		-
	Payments to acquire property, plant and equipment									(19.1)		(18.3)
	Intangible development expenditure									(24.3)		(12.8)
	Receipts from sale of property, plant and equipment									0.6		-
	Net receipts/(payments) on disposal/(acquisition) of available-for-sale investments									0.1		(3.4)
	Acquisition of interests in businesses net of cash acquired									(195.7)		(282.3)
	Acquisition of associates & joint ventures									(7.6)		(7.9)
	Net cash flows from investing activities									(239.3)		(320.8)
	Cash flows from financing activities
	Dividends paid to minority interests									(13.3)		(2.8)
	Equity dividend paid									(82.6)		(66.7)
	Payments to acquire Treasury Shares									(8.6)		(9.0)
	Payments to acquire own shares									(13.0)		(5.1)
	Proceeds from issue of ordinary shares									6.8		8.7
	Capital element of finance lease payments									-		(0.1)
	Repayment of borrowings									(183.3)		-
	Funds received from borrowing, net of fees									326.7		167.1
	Net cash flows from financing activities									32.7		92.1
	Exchange adjustments									3.5		(28.0)
	Net increase/(decrease) in cash and cash equivalents									64.6		(39.4)
	Net cash and cash equivalents at beginning of year									300.4		339.8
	Net cash and cash equivalents at end of year									365.0		300.4

Notes to the financial statements
1	Basis of preparation
	(a) Basis of preparation
	The financial statements have been prepared in accordance with IFRS adopted by the European Union, IFRIC interpretations and with those parts of the Companies Act 1985 applicable to companies reporting under IFRS and therefore comply with Article 4 of the EU IAS Regulation. The financial statements have also been prepared under the historical cost convention, as modified to include the fair value of certain financial instruments in accordance with IFRS. The financial statements are prepared in sterling, which is the functional currency of the parent company, ICAP plc.
	The Group maintains a columnar format for the presentation of its consolidated income statement. This enables the Group to continue its practice of improving the understanding of its results by presenting profit for the year before amortisation and impairment of intangibles arising on consolidation and exceptional items. This is the profit measure used to calculate adjusted EPS and is considered to be the most appropriate as it better reflects the Group's underlying cash earnings. Profit before amortisation and impairment of intangibles arising on consolidation and exceptional items is reconciled to profit before tax on the face of the income statement.
	Items which are of a non-recurring nature and material, when considering both size and nature, have been disclosed separately to give a clearer presentation of the Group's results. These items are shown as 'exceptional items' on the face of the income statement.
	The Group has reanalysed its prior year exceptional items to show income and expense items separately where they are unrelated. There is no overall effect on the results or net assets of the Group.
	Intangible assets arising on consolidation represent goodwill and other separately identifiable intangible assets on business combinations since 1 April 2004. The amortisation of separately identifiable intangible assets and any impairment of goodwill is included in the income statement within the column 'amortisation and impairment of intangibles arising on consolidation'.
	(b) Segmental analysis
	Primary segment - geographic
	The Group regards its primary reporting segment as geographic as this is substantially the basis on which it manages its operations. The three geographic business segments are Americas, EMEA and Asia Pacific.
	Secondary segment - business
	The Group's secondary segmentation is by business type - voice, electronic and information divisions.
	The voice division represents trades concluded directly by the Group's staff for interest rates, credit, FX, commodities and emerging market products. The electronic division represents trades concluded via electronic trading platforms and post-trade services. The information division represents the sale of market data and research services.
2	Segmental information
	(a) Analysis by geographic segment
						Year ended 31 March 2008
						Americas	EMEA	Asia Pacific	Total
						£m	£m	£m	£m
	Revenue					527.8	610.0	166.6	1,304.4
	Operating profit before amortisation and impairment of intangibles
	arising on consolidation and exceptional items					129.3	166.3	36.1	331.7
	Amortisation and impairment of intangibles arising on consolidation					(16.6)	(15.6)	(9.9)	(42.1)
	Exceptional items					3.5	(19.8)	5.0	(11.3)
	Operating profit					116.2	130.9	31.2	278.3
	Net finance income/(cost)					(2.3)	(5.4)	1.3	(6.4)
	Share of post-tax profit/(loss) of associates					(0.2)	1.8	1.6	3.2
	Profit before tax					113.7	127.3	34.1	275.1
	Included in revenue is £21.1m in respect of joint ventures (Americas £8.3m, EMEA £8.5m, Asia Pacific £4.3m). Included in operating profit is £5.0m in respect of joint ventures (Americas £1.8m, EMEA £2.1m, Asia Pacific £1.1m).
						Year ended 31 March 2007
						Americas	EMEA	Asia Pacific	Total
						£m	£m	£m	£m
	Revenue					458.3	502.4	145.6	1,106.3
	Operating profit before amortisation and impairment of intangibles
	arising on consolidation and exceptional items					104.2	124.4	19.1	247.7
	Amortisation and impairment of intangibles arising on consolidation					(14.9)	(12.8)	(13.2)	(40.9)
	Exceptional items					9.4	(4.4)	(0.2)	4.8
	Operating profit					98.7	107.2	5.7	211.6
	Net finance income/(cost)					(5.5)	2.7	0.7	(2.1)
	Share of post-tax profit of associates					-	2.7	1.6	4.3
	Profit before tax					93.2	112.6	8.0	213.8
	Included in revenue is £24.2m in respect of joint ventures (Americas £9.2m, EMEA £11.4m, Asia Pacific £3.6m). Included in operating profit is £6.7m in respect of joint ventures (Americas £2.7m, EMEA £3.3m, Asia Pacific £0.7m).
	(b) Analysis by business segment
					Year ended 31 March 2008
						Voice	Electronic	Information
						division	division	division	Total
						£m	£m	£m	£m
	Revenue					990.8	273.9	39.7	1,304.4
	Operating profit before amortisation and impairment of intangibles
	arising on consolidation and exceptional items					202.9	106.9	21.9	331.7
	Amortisation and impairment of intangibles arising on consolidation					(12.9)	(29.0)	(0.2)	(42.1)
	Exceptional items					2.2	(13.5)	-	(11.3)
	Operating profit					192.2	64.4	21.7	278.3
	Included in revenue is £21.1m in respect of joint ventures (voice division). Included in operating profit is £5.0m in respect of joint ventures (voice division).
					Year ended 31 March 2007
						Voice	Electronic	Information
						division	division	division	Total
						£m	£m	£m	£m
	Revenue					867.4	199.1	39.8	1,106.3
	Operating profit before amortisation and impairment of intangibles
	arising on consolidation and exceptional items					169.9	55.4	22.4	247.7
	Amortisation and impairment of intangibles arising on consolidation					(15.1)	(25.6)	(0.2)	(40.9)
	Exceptional items					16.1	(11.3)	-	4.8
	Operating profit					170.9	18.5	22.2	211.6
	Included in revenue is £24.2m in respect of joint ventures (voice division). Included in operating profit is £6.7m in respect of joint ventures (voice division).
3	Exceptional items
								Year ended	Year ended
								31 March	31 March
								2008	2007
								£m	£m
	EBS related exceptional costs							(13.5)	(11.3)
	Disputed post-trade settlement clearing adjustment							(12.7)	-
	Exceptional costs							(26.2)	(11.3)
	Disposal and closure of operations in prior year							1.3	16.1
	Other exceptional gains							13.6	-
	Exceptional income							14.9	16.1
	Net exceptional items before tax							(11.3)	4.8
	Tax							4.4	0.7
								(6.9)	5.5
	Exceptional items for the prior year have been reanalysed to show income and expenses separately where the items are unrelated. There is no effect on the overall results or net assets of the Group.
	The EBS related exceptional item relates to the final reorganisation and rationalisation costs following the acquisition of EBS in June 2006.
	A sub-custodian made a post-trade settlement adjustment debiting a Group company's account for a total of £22.5m without notice or the Group's consent. As a result of the need to resort to litigation to recover the debt, the Group has fully provided against this debt (£12.7m after offsetting cost recoveries).
	During the year ended 31 March 2007, the Group closed a number of its futures operations. The gain that arises in the current year is as a result of the disposal of shares and memberships included within available-for-sale assets whose disposal was restricted in the prior year. This is offset by rationalisation and other costs related to the closure of these businesses.
	Other exceptional gains arise from the disposal of exchange shares and seats together with litigation settlements in Australia and Hong Kong.
4	Tax
	Tax charged to the income statement in the year
								Year ended	Year ended
								31 March	31 March
								2008	2007
								£m	£m
	Current tax
	UK Corporation Tax at 30.0% (2007 - 30.0%)
	- Current year							44.5	36.3
	- Double tax relief							(0.9)	(0.4)
	- Adjustment to prior years							4.8	(5.1)
	Overseas tax
	- Current year							64.9	55.1
	- Adjustment to prior years							(3.1)	0.5
								110.2	86.4
	Deferred tax							(1.3)	1.7
								108.9	88.1
	The Group's share of profit of associates in the income statement is shown net of tax of £3.2m (2007 - £3.8m). The Group's tax charge is stated after taking into account the tax effect of exceptional items which reduced the Group's tax charge by £4.4m (2007 - £0.7m).
5	Dividends
								Year ended	Year ended
								31 March	31 March
								2008	2007
	Amounts recognised as distributions to equity holders in the year:							£m	£m
	Final dividend for the year ended 31 March 2007 of 9.3p per ordinary share (2006 - 7.5p)							59.1	47.6
	Interim dividend for the year ended 31 March 2008 of 3.7p per ordinary share (2007 - 3.0p)							23.5	19.1
								82.6	66.7
	The directors have proposed a final dividend of 11.95p per share for the year ended 31 March 2008. This has not been recognised as a liability of the Group at the year end as it has not yet been approved by shareholders. Based on the number of shares in issue at the year end, the total amount payable would be £76.0m.
	The right to receive dividends has been waived in respect of the shares held in employee trusts and the Treasury Shares.
6	Earnings per ordinary share
	The Group is required only to disclose the basic and diluted EPS on the face of the income statement. The Group continues to calculate an adjusted EPS measurement ratio, disclosed below, as it believes that it is the most appropriate measurement since it better reflects the business's underlying cash earnings.
	Basic earnings per share is calculated by dividing the profit for the year attributable to the equity holders of the parent of £155.7m (2007 - £121.3m) by the weighted average number of ordinary shares in issue during the year of 635.4m shares (2007 - 629.9m).
	The weighted average number of ordinary shares in issue excludes the weighted average number of shares held as Treasury Shares of 2.2m (2007 - 0.6m) and by trusts relating to employee share schemes on which dividends have been waived, being 11.5m shares (2007 - 9.9m).
	Diluted earnings per share takes into account the dilutive effect of share options outstanding under the Company's employee share schemes.
				Year ended 31 March 2008			Year ended 31 March 2007
						Earnings			Earnings
				Earnings	Shares	per share	Earnings	Shares	per share
				£m	millions	pence	£m	millions	pence
	Basic			155.7	635.4	24.5	121.3	629.9	19.3
	Dilutive effect of share options			-	16.7	(0.6)	-	16.4	(0.5)
	Dilutive effect of contingent share capital			-	-	-	-	0.3	-
	Diluted basic			155.7	652.1	23.9	121.3	646.6	18.8
	Adjusted earnings per share is based on earnings before amortisation and impairment of intangibles arising on consolidation and exceptional items (and their tax effects).
				Year ended 31 March 2008			Year ended 31 March 2007
						Earnings			Earnings
				Earnings	Shares	per share	Earnings	Shares	per share
				£m	millions	pence	£m	millions	pence
	Basic			155.7	635.4	24.5	121.3	629.9	19.3
	Amortisation and impairment of intangibles arising on consolidation
	net of tax and minority interest			36.0	-	5.7	39.3	-	6.2
	Exceptional items net of tax (note 3)			6.9	-	1.1	(5.5)	-	(0.9)
	Dilutive effect of contingent share capital			-	-	-	-	0.3	-
	Adjusted basic			198.6	635.4	31.3	155.1	630.2	24.6
	Adjusted diluted earnings per share for year was 30.5p (2007 - 24.0p).
7	Acquisitions
	(a) Subsidiaries
	Traiana Inc and subsidiaries (Traiana)
	On 3 December 2007 the Group acquired Traiana, a provider of post-trade services to financial institutions. Traiana is incorporated in the US, with subsidiary operations in the UK and Israel. The total consideration of £120.3m ($247.4m), including acquisition costs, was funded by cash of £116.4m ($239.3m) and options over ICAP ordinary 10p shares with a fair value of £3.9m ($8.1m). These options will vest over the next four years.
	Fair value adjustments include intangible assets arising on consolidation of £65.9m ($135.4m) that has been recognised in respect of customer relationships. This has been valued using the net present value of expected future cash flows and is being amortised over ten years. The Group considers the fair value of the goodwill of £45.4m is reasonable and relates to the future growth potential of the business that is not separately identifiable.
	In the period from acquisition to 31 March 2008, Traiana contributed £2.5m to revenue and a pre-tax loss (before amortisation of intangibles arising on consolidation and exceptional items) of £1.0m. If the acquisition had been completed on the first day of the financial year the estimated contribution to revenue would have been £7.6m, with a pre-tax loss (before amortisation of intangibles arising on consolidation and exceptional items) of £0.3m.
	ICAP Hyde Holdings Limited (formerly Hyde Holdings Limited) and related companies (Hyde)
	On 1 May 2007 the Group completed the acquisition of Hyde which consisted of 75% of ICAP Hyde & Company Limited (formerly J.E. Hyde & Co. Limited), a provider of a wide range of shipbroking and related services, and a 75% controlling interest in the freight derivatives joint venture that was created with ICAP in 2005. The consideration of £15.4m includes £2.5m of estimated deferred consideration, the final amount of which is dependent upon certain future revenue of Hyde. The maximum consideration payable is £17.7m.
	The fair value adjustments include the recognition of intangible assets arising on consolidation of £6.0m, the majority of which is in respect of customer relationships that are being amortised over six years. The Group considers that the fair value of £10.0m for the goodwill is reasonable and relates to the future growth potential of the business that is not separately identifiable.
	In the period from acquisition to 31 March 2008, Hyde contributed £23.6m to revenue and £5.5m to pre-tax profit (before amortisation of intangibles arising on consolidation and exceptional items). If the acquisition had been completed on the first day of the financial year, the estimated revenue would have been £25.0m with pre-tax profit (before amortisation of intangibles arising on consolidation and exceptional items) of £5.9m.
	Earnout arrangements exist that give the minority shareholders the option to sell the 25% owned by them to the Group in three equal instalments after three years. The Group has an option to buy the minority holding after six years. The fair value of these options is considered to be negligible, as the amounts paid will be at the fair value of the business.
	Capital Shipbrokers Limited and related companies (Capital)
	In January 2008, the Group acquired Capital through its investment in Hyde. Capital is incorporated in the UK and is involved in similar business activity to Hyde. Initial cash consideration was £21.7m with further deferred consideration estimated to be £6.2m in respect of a payment for the net assets and an earnout based on the profit for the three years post acquisition.
	Fair value adjustments including intangible assets arising on consolidation of £4.2m, representing customer relationships, have been recognised on acquisition. These assets will be amortised over five years. Goodwill of £21.6m was recognised on the acquisition, and the Group considers this to be the fair value of the future growth potential and synergies of Capital which are not separately identifiable.
	In the period from acquisition to 31 March 2008, Capital contributed an £0.5m to revenue and £0.1m to pre-tax profit (before amortisation of intangibles arising on consolidation and exceptional items). If the acquisition had been completed on the first day of the financial year, the estimated revenue would have been £8.3m with pre-tax profit (before amortisation of intangibles arising on consolidation and exceptional items) of £3.3m.
	Other acquisitions
	The Group has also invested £2.3m in new companies in Argentina, Brazil and Chile and a further £0.2m in Colombia. An additional £0.1m has been recognised as goodwill on acquisition.
	The Group acquired the 49.9% minority of Altex-ATS Limited for a nominal sum. The goodwill of £1.5m previously recognised on this acquisition has been reversed.
				Traiana		Other		Total
					Provisional		Provisional		Provisional
				Book	fair	Book	fair	Book	fair
				value	value	value	value	value	value
				£m	£m	£m	£m	£m	£m
	Net assets acquired
	Intangible assets arising on consolidation			-	65.9	-	10.2	-	76.1
	Intangible assets arising from development expenditure			4.6	4.6	-	-	4.6	4.6
	Property, plant and equipment			0.4	0.4	0.8	0.7	1.2	1.1
	Deferred tax asset			10.8	10.8	-	-	10.8	10.8
	Available-for-sale assets			-	-	0.1	0.1	0.1	0.1
	Cash and cash equivalents			0.3	0.3	7.0	7.0	7.3	7.3
	Trade and other receivables			0.8	0.8	9.4	9.4	10.2	10.2
	Trade and other payables			(7.9)	(7.9)	(13.3)	(13.3)	(21.2)	(21.2)
				9.0	74.9	4.0	14.1	13.0	89.0
	Goodwill				45.4		31.7		77.1
	Consideration				120.3		45.8		166.1
	Satisfied by:
	Cash				115.4		32.2		147.6
	Acquisition costs				1.0		0.7		1.7
	Shares				3.9		-		3.9
	Loan notes				-		4.2		4.2
	Deferred consideration				-		8.7		8.7
					120.3		45.8		166.1
	(b) Associates and joint ventures
	In December 2007, the Group acquired a 50% stake in Skaarup Shipbrokers Inc, a shipbroking joint venture based in the US, for £0.8m, through its investment in Hyde. Goodwill of £0.8m has been recognised on the acquisition.
	In January 2008, the Group acquired a 33% stake in Confirmhub LLC, a company based in the US for £0.4m. Confirmhub LLC provides post-trade services to customers in the energy markets. As part of the acquisition of Capital, the Group acquired a stake in Island Shipbrokers Pte Ltd, a shipbroking company based in Singapore, and Capital Shipbrokers Ltd, a shipbroking company based in Hong Kong. These have all been recognised in additions to associates.
	(c) Deferred contingent consideration paid in year
	In January 2008 the Group acquired a further 42.5% of Reset for £49.4m ($96.2m) in accordance with the terms of the acquisition agreement and the Group now owns 63.75% of the Reset business.
8	Capital and reserves
	Statement of changes in shareholders' equity - Group
							Year ended		Year ended
							31 March		31 March
							2008		2007
							£m		£m
	As at beginning of year						781.2		603.8
	Total recognised income and expenses for the year						128.8		72.0
	Ordinary shares issued						0.6		181.0
	Increase in investment in own shares						(13.0)		(5.1)
	Dividends paid in the year						(82.6)		(66.7)
	Share-based payments in the year						5.7		4.9
	Options exercised in the year						-		(1.2)
	Treasury Shares acquired in the year						(8.6)		(9.0)
	Shares issued from Treasury in the year						6.2		0.3
	Shares issued by trust in the year						1.5		1.2
	As at end of year						819.8		781.2
	Minority interests - equity						13.6		12.5
	Total equity						833.4		793.7
9	Contingent liabilities
	(a) On 27 January 2004 National Australia Bank (NAB) announced that it incurred FX trading losses of A$360 million (£156 million). ICAP plc has received correspondence from NAB alleging that revaluation data, supplied by an individual within one of ICAP's Singapore subsidiaries (a member of the TFS-ICAP joint venture), helped NAB mask these losses. The last correspondence to ICAP from NAB on this subject was received on 27 October 2006. The ICAP Group does not accept any responsibility for NAB's trading losses and intends to vigorously contest any claim which may be made against them in relation to this matter. No provision has been made in the financial statements.
	(b) The highly regulated nature of the Group's business means that from time to time the Group is subject to regulatory enquiries and investigations, particularly in the US. The Group is currently involved in a number of these. Some of these regulatory enquiries and investigations are broad and tend to be interdealer industry wide in nature.
	In the US, the Securities and Exchange Commission ("SEC") has issued a formal order of investigation to ICAP Securities USA LLC, a wholly owned subsidiary of the Group, and other interdealer brokers in government and other fixed income securities. ICAP Securities USA LLC is co-operating with the inquiry. Although ICAP Securities USA LLC has not received notice of an intention by the SEC to bring any charges against ICAP Securities USA LLC or its executives, the potential range of penalties generally available to the SEC include, among other things, financial penalties, disgorgement, fines, actions against individuals, and injunctive and other remedial relief.
	Such matters are inherently subject to many uncertainties and the Group cannot predict their outcomes. However, there are no issues which are currently expected to have a material adverse financial impact on the Group's results or net assets.
	(c) In the normal course of business, certain Group companies enter into guarantees to cover trading arrangements.
10	Exchange rates
	The principal exchange rates which affect the Group, expressed in currency per £1, are shown below:
						Closing rate	Closing rate	Average rate	Average rate
						as at	as at	year ended	year ended
						31 March 2008	31 March 2007	31 March 2008	31 March 2007
	US dollar					1.99	1.96	2.01	1.89
	Euro					1.25	1.47	1.42	1.47
	Yen					197.83	231.59	228.89	221.19
	The Group is exposed to foreign exchange translational risk on consolidation of its overseas operations not denominated in sterling. During the year ended 31 March 2008, the US dollar depreciated by 1% with respect to sterling and the euro appreciated by 15%. In accordance with IAS21 "The Effects of Changes in Foreign Exchange Rates", the resulting translational exchange difference is included within the exchange adjustment taken directly to reserves, as disclosed in the consolidated statement of recognised income and expense.
11	Cash flow
	Reconciliation of profit before tax to net cash flow from operating activities
								Year ended	Year ended
								31 March	31 March
								2008	2007
								£m	£m
	Profit before tax							275.1	213.8
	Operating exceptional items							11.3	(4.8)
	Share of operating profits of associates after tax							(4.9)	(6.0)
	Amortisation and impairment of intangible assets arising on consolidation							43.8	42.6
	Amortisation and impairment of intangible assets arising from development expenditure							14.0	10.2
	Depreciation of property, plant and equipment							21.7	21.5
	Other amortisation and impairments							1.0	0.3
	Share-based payments							5.7	4.9
	Loss on sale of property, plant and equipment							-	2.6
	Profit on disposal of available-for-sale investments							-	(1.9)
	Net finance expense							6.4	2.1
	Operating cash flows before movements in working capital							374.1	285.3
	Increase in trade and other receivables							(59.0)	(25.9)
	Increase in trade and other payables							57.9	14.2
	Net receipts in respect of financial assets held at fair value							0.5	7.9
	Cash generated by operations before exceptional items							373.5	281.5
	Operating exceptional items (paid)/received							(11.6)	22.0
	Cash generated by operations							361.9	303.5
	Interest received							16.5	14.7
	Interest paid							(20.6)	(20.9)
	Tax							(90.1)	(80.0)
	Net cash flow from operating activities							267.7	217.3
12	Post balance sheet events
	On 7 April 2008 the Group announced that it had acquired all of the share capital of The Link Asset and Securities Company Limited (Link), a global equity derivatives broker, for an initial consideration of £135m plus the amount by which Link's net assets exceed its regulatory capital requirement, capped at £30m. The Group will also pay additional deferred consideration equal to 25% of nine times the profit after tax of the Link group for the year ended 31 March 2010 after it has been amalgamated with certain complementary businesses of the Group. The initial consideration was funded from a new £150m term loan facility.

ENDFR UKRWRWURVAAR

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